At a rally with community organizations on Sunday, Illinois Attorney General Lisa Madigan is expected to commit to pressing for “maximum” mortgage relief for underwater homeowners as part of the federal-state investigation into bank fraud.

She’ll appear with the regional organizing network IIRON on Sunday, June 10 at 3 p.m. at St. Mark’s United Methodist Church, 8441 S. St. Lawrence. IIRON will also be unveiling a new Covenant for Economic Justice.

It’s a significant step for Madigan, who’s a member of an Obama administration task force investigating securitization fraud in the foreclosure crisis, organizers say.

Last year IIRON pressed Madigan to hold out for more money to help homeowners wrongfully foreclosed on in the robo-signing settlement by state attorney generals. Though the monetary settlement in that case was disappointing, grassroots pressure did result in limiting banks’ immunity from liability in the deal, said David Hatch of IIRON.

He said IIRON and groups including National People’s Action are calling for $350 billion worth of principal reduction for underwater homeowners. An NPA report last year estimated underwater homeowners in the U.S. owe a total of $700 billion more than their homes are worth.

Stealth bailout

That’s a serious drag on the economy, these groups argue, taking hundreds of billions of dollars out of the consumer economy – and a “stealth bailout” of banks, which caused the housing crash through reckless and predatory lending practices, and which have received trillions of dollars in bailouts and backstops, most of which will never be repaid.

Large-scale principal reduction would set the housing market on a firm foundation and constitute a significant economic stimulus – and boost to government revenues – and no cost to taxpayers.

One obstacle to large-scale relief is the opposition of Federal Home Finance Administration interim director Edward DeMarco, who has blocked government-backed Fannie Mae and Freddie Mac – which together own 70 percent of the nation’s mortgages – from carrying out principal reduction.

Madigan recently wrote DeMarco calling on him to reverse that policy. IIRON, NPA, and others have called on President Obama to replace DeMarco.

IIRON and other local groups were among a thousand NPA members who protested last month at FHFA offices in Washington D.C., Hatch said.

Values

The Covenant on Economic Justice is “a conscious attempt to change the conversation about what our economy should look like” by reclaiming the idea of values from those who maintain “that justice can be distributed through the market, that basic human needs should be treated like commodities,” Hatch said.

As a faith-based network of grassroots organizations, IIRON “will put these values to work in our organizing around issues,” Hatch said. “Whether in the housing crisis and foreclosure prevention or calling for services instead of cuts and for taxing the rich, all our work is evidence that we mean it when we sign.”

The group is also calling on JPMorgan/Chase to “return the favor” of its taxpayer bailout by turning vacant foreclosed properties over to nonprofit housing groups for use as affordable rental properties.